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Bitstrade Hit With Cease and Desist by New Jersey Watchdog

Last Updated March 4, 2021 5:04 PM
Gerelyn Terzo
Last Updated March 4, 2021 5:04 PM

New Jersey’s Attorney General says the online bitcoin investment platform has been fraudulently selling unregistered securities in the state. The New Jersey Bureau of Securities, a division of AG Gurbir S. Grewal’s office, has sent a cease-and-desist letter  to Bitstrade, effective immediately, alleging that the company is in violation of the State’s Uniform Securities Law for pooling investments and promising returns of 10%, accruing daily. Bitstrade takes payments in bitcoin.

The Bureau’s response comes in the wake of a meeting among federal lawmakers to discuss the crafting of a regulatory framework for cryptocurrencies. Meanwhile, AG Grewal said the Bureau is looking to “protect investors as they navigate the uncharted and largely unregulated domain of cryptocurrency-related investments.”

“Bitstrade is a prime example of a company seeking to capitalize on the cryptocurrency craze. Regulators, including the Bureau, are actively responding to fraudulent crypto-cloaked securities offerings,” said Bureau chief Christopher W. Gerold in the statement.

The state’s approach has the hallmarks of similar action taken by Texas regulators against Bitconnect, leading to a series of events that led the bitcoin investment platform to shut its doors, which doesn’t bode well for Bitstrade.

Opaque Bitstrade

But with the exception of bitcoin, little is known of Bitstrade’s investment approach. They have a table on the home page listing the top 10 investors who wish to identify themselves alongside recent withdrawals. Bitstrade boasts nearly 1,000 “happy investors” across more than $802,000 total invested. But their activity in the state of New Jersey is unclear.

Bitstrade has minimum and maximum investment allocations of $10 and $100,000, respectively, promising “the more you invest, the more profit you will receive,” as per the website.

Investment Pool, Fixed Returns

Bitstrade runs an investment pool that combines small allocations from members and redirects the funds into what the company describes as a “single huge investment.” According to the letter, Bitstrade promises investors return of as high as 10% that “accrue daily.” Bitconnect, before it was shuttered, similarly promised investors fixed returns.

Meanwhile, Bitstrade isn’t registered to sell securities in the state of New Jersey, which has the regulator crying foul. The NJ Securities watchdog also took issue with a lack of transparency surrounding the Bitstrade management team, its headquarters, the health of the balance sheet, risks associated with the pooled investments and the precise securities that investors are gaining exposure to.

A visit to the Bitstrade website reveals that they are domiciled in either Redlands, Calif. or Scottsdale, Ariz., but the NJ Bureau contests that the California address is fabricated while the other is a dead-end. Bitstrade doesn’t list its management team on the website. They claim to work with “e-currencies,” offering features such as instant deposits and withdrawals.

Certainly, Bitstrade’s business practices raise some eyebrows. But at the same time, the NJ Bureau doesn’t appear to be a fan of cryptocurrencies, referring to them as “virtually anonymous” and saying they offer investors “no recourse … to recoup their losses.”

But some digital coins are more anonymous than others, and exchanges are increasingly engaged with regulators and lawmakers to stave off fraudulent activity.

Featured image from Shutterstock.